‘Proper supervision the answer, not increased capital’

The Chief Executive Officer of Heritage Microfinance, a newly-launched microfinance firm in Kumasi, Mr. Kwame Basoa is proposing the Bank of Ghana strengthens its supervision and control mechanisms on the operations of microfinance companies.

This, he believes, will be one of the effective tools to ensure efficiency in the industry irrespective of the size of the MFI companies’ capital base.

Mr. Basoa said the regulator’s consideration to review upward the GH¢100,000 minimum capital deposit required for a microfinance licence in the country may not necessarily be the solution for bringing an end to the challenges and ‘controversies’ the industry is battling with. He noted that ‘dubious’ characters could still find means to abscond with customers’ monies however huge their minimum capital deposit may be’.

He, therefore, called for more ‘checks and balances’ to be carried out on the work of microfinance institutions to help in flushing out ‘phony’ microfinance firms that only exist to take advantage of their customers.

His advice comes on the heels of recent announcement of the Central Bank to review the minimum capital deposit required for a microfinance license in the country. According to the Central Bank’s regulations, banks are required to deposit a minimum of GH?60million for a licence to operate while savings and loans companies are required to deposit GH?7million; but microfinance companies deposit a paltry GH¢100,000.

Following this indication by the BoG to review the minimum capital deposit of microfinance companies, several players in the industry have come forward to offer varied opinions on the issue -- with the latest being Mr. Kwame Basoa in an exclusive interview with B&FT during the launch of Heritage Microfinance in Kumasi.

He said the introduction of Heritage Microfinance will contribute to growth of the industry, considering the depth of experience, innovative products and services, and research findings available to management of the firm.

He revealed that most microfinance firms fold-up usually around May to August owing to a number of factors; key among which is inability of the firms to give out loans, and also make positive recoveries, around the periods known to be farming seasons.

Mr. Basoa therefore advised competitors in the industry to cut down on their huge expenditure and save some of the monies in liquidity to position themselves to be able to offer loans to their clients during such times, and further called on them to properly streamline their operations to meet the demands of their customers while engaging competent personnel to run their operations.

He also lamented the unrealistic interest charges which some microfinance firms burden customers with, and hinted that the Heritage Microfinance is in to offer the lowest and most-realistic-ever interest on loans customers apply for. Interestingly, Heritage Microfinance -- though new in the system -- was disclosed to have already started disbursing loans to some of its customers, unlike other microfinance companies which require customers to save with them for some number of months before giving loans.

Among the numerous unique products and services on offer at Heritage Microfinance, Mr. Basoa said the Company takes time to offer investment advice to customers to help them make positive returns from the area of trade.